Putin Promises Venezuela First-Rate Oil Technology

In the latest show of goodwill between the Russian-Venezuelan alliance, Prime Minister Vladimir Putin has pledged splendid Russian oil technology for Venezuela's oil fields.

Russia will use the most modern oil extraction and processing technology if it wins access to Venezuela's oil deposits, Prime Minister Vladimir Putin told a Venezuelan official delegation on Tuesday.

Venezuela's state oil company PDVSA and a consortium of Russian firms expect next month to present a joint venture that aims to develop the Junin 6 block in the Orinoco oil belt, which Venezuela says has the world's largest hydrocarbon reserves.

[...]

"If we will work in Venezuela and realise all our plans, the technology and equipment which will be used in Venezuela will be even more modern," Putin said.

"The Russian companies will use the latest technology available in global markets," Putin said.

A formal contract to jointly develop the Junin 6 block with an estimated production capacity of 200,000 barrels per day should be signed before the end of the year.

- Brewskie

US Doesn't Need Mexican, Venezuelan Oil

While Mexico's largest oil field, Cantarell, makes fantastic belly-flop dives straight from the diving board, onto the sun-bathed pavement, I've made this assertion in the past: Who needs Cantarell anyway? With declining oil consumption, increased exploration and production in the Gulf of Mexico, plus our friendly neighbor to the north (along with investments for pipelines running that way), I say let Cantarell crap out, let Hugo Chavez fester. This Reuters commentary strongly agrees:

Growing volumes of crude oil from Canada and the Gulf of Mexico should assure U.S. Gulf Coast refiners adequate supplies for years to come despite fast-declining imports from Mexico and Venezuela.

Imports from the two major Latin American suppliers have dwindled by 24 percent in the past four years, but the huge refining region they serve is unlikely to run short due to billions of dollars planned for new pipelines from Canada and exploration in the deepwater Gulf, analysts said.

Canadian oil sands production alone could make up for both losses, said analyst Martin King of Calgary-based FirstEnergy Capital Corp. "You're essentially switching to Canadian crude from Mexican and Venezuelan," King said.

In its June forecast, the Canadian Association of Petroleum Producers said it expects output from northern Alberta's vast oil sands to nearly double to 2.2 million barrels a day by 2015. Weak oil prices and the credit crunch led numerous companies to delay development projects, forcing CAPP to cut expectations from its previous forecast.

Still, pipeliners have zeroed in on the Gulf Coast -- site of 40 percent of U.S. refining capacity -- as the next big market for Canadian oil. There, Mexican and Venezuelan imports have fallen by 700,000 bpd since 2004, according to the U.S. Energy Information Administration.TransCanada Corp's (TRP.TO) proposed $7 billion Keystone XL pipeline expansion would ship as much as 500,000 bpd to Gulf Coast refineries by 2012.

Enbridge Inc (ENB.TO) and BP Plc (BP.L) are working to develop a 250,000 bpd system to the Gulf Coast by that same year at a cost of up to $2 billion.

Several other proposals, including one to move Canadian crude to the region by rail, are on the drawing board.

U.S. Gulf output is expected to rise 300,000 bpd to 1.5 million bpd by 2013, largely due to deepwater expansion, and could grow to 1.9 million bpd if ultradeep discoveries prove out, the U.S. Minerals Management Service said.

Twenty-eight offshore Gulf projects are expected to come on line by 2015, more than a dozen of them in waters below 5,000 feet, the accepted threshold for ultradeep water, according to IHS Cambridge Energy Research Associates.

The expected growth in Gulf production is an expectation I highlighted a while back...

- Brewskie

Columbia Announces Largest Oil Field in its History

It's oil, oil, oil today; burning petroleum is blazing up the bandwidth. Columbia announced an upward reserve projection of an oil field: 500 million barrels, up from 100 million (link).

A Colombian oil field, operated by state petroleum company Ecopetrol ECO.CN and Canada's Pacific Rubiales Energy Corp, is estimated by the government to have 500 million barrels in reserves.

If the estimate is correct, it would make the field, located in the southern province of Meta, the biggest in Colombia. The Andean country is in a race against time to discover reserves in order to avoid becoming a net petroleum importer.

"Rubiales' reserves, which were initially estimated at 100 million barrels, today are estimated at 500 million barrels," Energy Minister Hernan Martinez said late Wednesday.

- Brewskie

Occidental Nails California's Largest Discoveries in Decades

Okay, before we get ahead of ourselves, let's first clarify this is not Prudhoe Bay, the East Texas Oil Field, Wilmington or even Thuderhorse. But it's a respectable find, particularly for a state long past its oil glory: 150 million to 250 million barrels of oil equivalent reserves, the bulk of it in natural gas. Located in Kern County, it's the state's largest find in over 35 years.

Occidental reported earlier they were bucking conventional wisdom, looking for California crude where others saw dirt. That was July 25; who would have guessed they would strike this lucky, this quickly? And good timing, too: their second-quarter profit slumped 70%.

California-based Occidental Petroleum Corp. announced a significant discovery in the south of the state that it says is among the largest finds in 35 years.

Occidental said it made new discoveries in Kern County, Calif. The U.S. energy giant said it believes there are between 150 million and 250 million barrels of oil equivalent reserves in the discovery area.

Ray Irani, chairman and chief executive officer at Occidental, said it is "probable" there are additional resources in place outside the delineated area, which it plans to explore within the next five years.

The bulk of the reserves in the discovery zone are in natural gas. Irani lauded the discovery as one of the biggest finds in decades.

"We believe this to be the largest new oil and gas discovery made in California in more than 35 years," he said.

- Brewskie

OPEC: Market Fundamentals Unlikely to Ignite 2010 Price Inferno

OPEC doesn't believe market fundamentals will set 2010 oil markets ablaze:

The oil cartel said in its latest monthly oil market report released July 14 that lower projected demand for its crude would increase its surplus production capacity which, combined with increased idle refining capacity, would be enough to compensate for any sudden demand surge or supply disruption.

"Given the projected outlook, increasing OPEC spare capacity and growing idle refining capacity should be sufficient to offset any sudden surge in demand or supply disruption in either crude or products," OPEC said, without giving figures for its current or projected surplus capacity levels.

"This reduces the likelihood of fundamental factors exerting strong upward pressure on prices in 2010."

Although OPEC sees world oil demand growing by 500,000 b/d in 2010, it expects this to be satisfied by non-OPEC producers and sees demand for its own crude falling by 400,000 b/d next year on top of the 2.3 million b/d drop in demand between 2008 and 2009.

With current crude production -- estimated at 28.44 million b/d in June -- more than 300,000 b/d than the 28.1 million b/d projected 2010 call on OPEC crude, the cartel will have food for thought at its next meeting, scheduled for September 9 in Vienna.

- Brewskie

Squeezing More Gasoline Out of Crude

It seems like I've been posting a lot on hydrocarbons this week. Never the less (link)...

In an effort to make gasoline production cleaner and more efficient, Rive Technology of Cambridge, MA, is developing a catalyst that can help turn a greater percentage of crude petroleum into gasoline and other usable products. The company, which is testing the catalyst in its pilot plant in South Brunswick, NJ, believes that the technology will be able to process lower-grade fossil fuels and reduce the amount of energy that goes into the refining process.

Andrew Dougherty, vice president of operations at Rive, says that the catalyst could increase the proportion of petroleum processed by as much as 7 to 9 percent. "We're going to need liquid, fossil-fuel-based transportation fuels for the foreseeable future," he says. "We help make the production of those fuels much more efficient."

The company's technology is based on zeolites--tiny pore-studded particles made of a mix of aluminum, oxygen, and silicon that are a mainstay of the petroleum and petrochemical industries. Heated and mixed in with crude petroleum, zeolites act as a catalyst, breaking apart the complex hydrocarbon molecules of crude into simpler hydrocarbons that make gasoline, diesel, kerosene, and other desirable products in the process known as fluid catalytic cracking. By making zeolites with pores larger than those in conventional ones, Rive hopes to create catalysts that handle a higher proportion of hydrocarbons.

Typically, the openings of pores in zeolites are less than a nanometer wide, which limits the range of hydrocarbon that can get into the porous catalysts. But Javier Garcia Martinez, a cofounder of Rive and now a professor at the University of Alicante, in Spain, came up with a way to control the size of the openings while working as a postdoctoral fellow at MIT's Nanostructured Materials Research Laboratory. He mixes the constituents of the zeolites in an alkaline solution, then adds a surfactant--a soaplike liquid. The surfactant makes bubbles, and the zeolites form around the bubbles. Then he burns away the surfactant, leaving behind zeolites with openings two to five nanometers wide--big enough to let in larger hydrocarbon molecules. By varying the chemistry of the surfactant, Garcia Martinez can control the size of the pore openings.

Part of improving the yield will be a result of perfecting the catalyst, which must be mixed with clay and other inert materials and spray-dried to create microspheres about 0.10 millimeters in diameter. The pilot plant is testing different combinations of materials to get the best properties. "By the end of the year, we hope to have hit upon the optimum mix of these things," says Dougherty. "We hope to be in commercial refineries in the second half of 2011." The plan is to license the recipe to commercial manufacturers of petroleum catalysts, such as BASF or W.R. Grace.

Dougherty also sees Rive's zeolites being used in hydrocracking, a refining technique that employs high-pressure hydrogen to create a low-sulfur diesel. Hydrocracking is a small market, but with the U.S. Environmental Protection Agency trying to reduce sulfur emissions, it's a growing one, he says. With its ability to choose pore size, the company might also make catalysts for processing tar sands, which contain extremely dense petroleum. Further down the road, the material might also be used to process biofuels, according to the company.

- Brewskie

Guess What OPEC's Been Doing? (Suprised?)

OPEC has stated repeatedly it prefers a target oil price of $70-80 per barrel, and has committed produciton cuts to reach that aim. Since oil's been higher the past several months, guess what OPEC is having a problem with? Historical non-compliance:

OPEC nominally still has big oil-production cuts in place, but cartel members such as Iran and Angloa—both suffering from the recession—are looking for revenue in extra barrels of crude. Compliance among OPEC’s 11 quota-bound members was down to 68% in June, after reaching 80% earlier this year, according to the International Energy Agency.

That compliance rate is par for the course, historically. But it means that since April, OPEC increased production by about 330,000 barrels a day. And additional oil has hit the market from other sources, the IEA says. Since demand is still fairly week and inventories are still bulging, that extra crude is simply feeding oil bears.

Is that a good idea to pursue when there's a already a global glut?

- Brewskie

Gensler Wants to Kill the Rats

Oil's 45 cents above $60 at this writing. Regardless, it's been demonstrated that oil speculators, not peak oil, will be humanity's thorn in the future. The masses are fed up with a relative handful of fat rats who pillage humanity's wallet: purchase up paper contracts of oil, without buying the actual asset, and eating their cheese while the working blobs pay up.

The previous Bush administration was clueless with commodities; will the Obama administration fare better? The former Goldman Sachs (one of the biggest beneficiaries of last year's oil drive up) and Treasure Department amigo, Gary Gensler, says he's game:

With the public clamouring for more market regulation, Mr. Gensler was seen as a bad choice to become chairman of the Commodity Futures Trading Commission (CTFC), given his years with Goldman Sachs and at the U.S. Department of the Treasury, where he helped deregulate energy trading.

Mr. Gensler spent five months convincing senators he was up to the challenge and he was finally confirmed in late May. On Tuesday, he backed up his promises by announcing plans for a sweeping crackdown on speculation in energy trading.

The CFTC chairman said he will hold public hearings on whether the CFTC should impose strict limits on the number of contracts energy traders can hold.

The change would radically transform the trading of crude oil, heating oil, natural gas, gasoline and other energy products.

[...]

Mr. Gensler's willingness to look at limiting traders' contracts marks a dramatic shift for the CFTC, which for years had insisted there was no hard evidence that speculators were affecting the price of oil.

Former chairman Walter Lukken, a Republican, had long rejected such suggestions and the CFTC released a report last fall showing that index traders and swap dealers had not significantly influenced the price of oil.

Mr. Gensler has taken the opposite view. He told senators earlier this year that excessive speculation can cause “sudden or unreasonable fluctuations” in commodity prices and he promised a “fresh look at the role of speculation in commodity futures markets.”

He has already launched a review of natural gas trading on the Intercontinental Exchange, or ICE, which operates out of London and is largely unregulated by the CFTC. Meanwhile, Congress is considering legislation that would go even further and tighten regulation of virtually all commodity trading, including swaps, over-the-counter trades and financial products such as credit default swaps.

The CFTC already has broad powers to set so-called position limits in order to prevent price manipulation through corners or squeezes. For example, no trader can own more than 5,000 wheat contracts that expire in the same month.

However, the CFTC has permitted numerous exemptions over the years that have watered down the rules and allowed institutional investors and index funds to hold unlimited amounts. A recent report by a Senate subcommittee concluded that index funds owned up to half of all wheat contracts that traded on the Chicago-based CME Group. That concentration, the report said, was one of the major causes of unwarranted price changes.

The CFTC has also allowed exchanges to set their own limits for energy trading. These so called “accountability levels” have also loosened up over time. For example, the New York Mercantile Exchange officially restricts traders to owning up to 10,000 light sweet crude oil contracts for any one delivery month and no more than 20,000 for all months. But because of numerous exemptions handed out by the exchange, some traders hold more than 300,000 contracts at a time. Since 2006, Nymex has granted 117 exemptions from its levels to index funds, swap traders and others.

Perhaps this will work, perhaps not. Thomas Jefferson said (and I can't remember the exact quote right now) something in the effect that government should not be viewed with adulation, but rather, with a mark of skepticism. Although Obama will no doubt surpass his predecessor (a dog could do that), his approach to tightening the leash on Wall Street's nefarious behavior has been somewhat of a disappointment.

- Brewskie

Cheap Coal to Oil

This is only in fetus phase, so it's uncertain to predict where this will go, but University of Texas Researchers of Arlington say they have developed a method of converting lignite (brown coal - lousy stuff) into Texas intermediate-quality crude oil - at a price that's roughly half, $35 instead of $65 or $70.

Read here or click the link:

In a few years, the researchers predict, their discovery could lead to oil that costs $35 a barrel instead of the current $65 to $70.

This could translate into a Lone Star bonanza. Texas sits on a 200-year supply of lignite that's easily accessible because it lies near the earth's surface. Lignite, one of the lowest and cheapest grades of coal, is now used to fuel steam-electric power generation.

The research team had three goals according to the article:

• "To produce a quality oil out of coal."

• "Get the production cost of that oil down to at least $35 per barrel."

• "Come up with a concept for refining the oil."

The team has accomplished all those things, Billo said, and coming up with a way to refine the oil was key.

The group developed a microrefinery that can manufacture oil from coal without the huge financial cost associated with traditional refineries.

"The team's microrefinery would fit anywhere you could put a structure that's 20 feet wide by 20 feet long by 20 feet high," Billo said. "Each microrefinery would cost about $5 million and could produce 500 to 1,000 barrels of crude per day."

Billo said that $5 million may sound like a lot – but not when compared with a traditional refinery, which costs "from $800 million to $6 billion, depending on the size and the real estate."

[...]

UTA's methodology was based on work at the University of West Virginia, which holds patents on converting bituminous soft coal, a much higher grade than lignite, into crude oil.

The two schools still work together, but UTA found that working with lignite presented demands different from those of bituminous coal.

"By producing an oil between light sweet and heavy crude, we surpassed our expectations," Billo said.

"We spent the first year proving we can make good oil. Next year, we expect to improve the quantity. We should be able to get two barrels of oil out of a ton of lignite. "In the next couple of years, lignite will be selling for $12 to $14 a ton, while bituminous will cost $60 to $70 a ton."

"In two years, we want to have built an industrial-size refinery. We want to ramp them up to 10 [microrefineries] side by side, producing 10,000 barrels a day, just a pittance. But it would blend with other crude regardless of its weight."

Guido Verbec of the University of North Texas Chemistry Department analyzed the UTA oil from lignite and said: "The distribution of the hydrocarbon chains are between C23 and C33, so that's a good distribution and looks more refined than standard crude oil."

- Brewskie

Gulf of Mexico Forecasts Record Oil Production

Gulf of Mexico Oil production is believed to be heading for greater heights, hitting 1.9 mbpd in a few years, up from 1.2 of last year:

Gulf of Mexico oil production is forecast to increase substantially over the next few years, possibly reaching 1.9 MMb/d in 2013 which would be a record high, according to Richie Baud, MMS deputy regional supervisor for the Office of Production and Development. This is MMS’ best-case scenario, which factors in industry-announced discoveries and undiscovered resources.

Recent startups at BP-operated Thunder Horse (capacity: 280 Mb/d oil; 200 MMcf/d gas), BHP-operated Shenzi (capacity: 100 Mb/d oil; 50 MMcf/d gas), Chevron-operated Tahiti (capacity: 125 Mb/d oil; 70 MMcf/d gas), and volumes of oil and gas production coming back online from hurricane shut-ins, are reversing the GoM oil production trend upward, albeit temporarily, beginning this year. MMS says 75% of the increase in oil production and 72% of the increase in gas production will
result from hurricane shut-ins coming back online.

Well, gas might down in a couple of years (but who cares - we've got a centuries worth of gas here onshore)...

Meanwhile, based on existing shallow water and deepwater operator commitments,
GoM natural gas production is forecast to increase slightly this year over last year, to about 7 bcf/d, according to MMS. However, in 2010, gas output is forecast to begin declining again, even with the addition of resources from industry announced discoveries.

Nevermind; onto the good news...

In 2008, operators announced 15 new deepwater discoveries, almost double
the number reported in 2007. Seven new deepwater projects (Bass Lite, Neptune, Blind Faith, Mississippi Canyon block 161, Raton, Thunder Horse, and
Valley Forge) began production last year, bringing the total to 141. This is up from 130 at the end of 2007. Meanwhile, 73% of the tracts receiving bids in the three GoM lease sales held in 2008 are in deepwater.

Say, haven't peakers been loquaciously warning about declining oil discoveries? With Brazil, Angola, Iran, Saudi Arabia, the Arctic and the Gulf of Mexico, it looks like there's plenty of oil left to be found...

Much of the new development in the GoM is in ultra deepwater (water depths greater than 5,000 ft [1,524 m]), and often targeting high temperature and high pressure prospects beneath salt canopies with layers of tar, which complicates drilling and production. This requires rigs equipped with the latest technology, and production systems suited for harsh weather, in areas with minimal existing infrastructure.

“The deepwater frontier has entered a new phase,” says Mike Prendergast, MMS chief of staff, GoM region. He points to the increasing use of hub facilities as a trend
in deepwater development. “Hub facilities will serve a bigger role as drilling moves to deeper waters, and this will require further development of MODU technology as many of the hubs lack drilling capacity,” he says.

Chevron recently announced it has initiated front-end engineering and design of a new deepwater hub to develop the Jack and St. Malo discoveries. The floating
production platform will be a semisubmersible designed facility with an initial nameplate capacity between 120,000 and 150,000 b/d of oil, 37.5 MMcf/d of gas, and provision for a future 200,000 b/d of water injection. It will be moored in 7,000 ft (2,134 m) of water. Mustang won the contract for topsides FEED, with completion expected in 2Q 2010.

[...]

Many of the newbuild MODUs scheduled for delivery to the GoM will be equipped with DP systems, and capable of drilling in up to 12,000 ft (3,658 m) of water to 40,000 ft (12,192 m) TD. In 2007, MMS reported a record number of
rigs (15) drilling in ultra deepwater. Although this record has not
been surpassed, MMS expects increased drilling in this water depth, with 15 newbuild MODUs scheduled for delivery to the GoM in 2009-2011. MMS expects two
new drillships and six new semisubmersibles in this year, five new drillships
and one semisubmersible in 2010, and one new semisubmersible in 2011. Also, four
semisubmersible rigs are being upgraded to drill in ultra deepwater, with delivery to the GoM expected in this year and in 2010.

- Brewskie

N Dakota Production Ramping Up

It's no Prudhoe Bay in her prime (nor even now), but N Dakota's production of Bakken is ramping up nicely, making it the fifth-most productive state:

Development of the promising Bakken Shale formation is reshuffling the deck for US states with bragging rights on oil production, boosting North Dakota now into the top tier of oilpatch jurisdictions.

Thanks to the Bakken, North Dakota has drilled past New Mexico, Wyoming and the venerable Oklahoma to claim fifth place among US oil producing states with average daily output of 202,000 b/d, according to EIA data at the end of last year, before activity slowed for the latest recession.

Excluding offshore output, Louisiana may well be in reach with its production of 209,000 b/d. But the Bakken will have to prove extremely prolific for North Dakota to challenge California's 587,000 b/d, Alaska's 702,000 b/d or Texas' 1.09 million b/d any time soon.

Given the optimism of some USGS reports about the potential for the Bakken, however, we may be watching the emergence of a new state oil-producing powerhouse. Last year the USGS estimated the Bakken formation may hold anywhere from 3 billion to 4.3 billion barrels of recoverable oil.

North Dakota's 202,000 b/d average for December of 2008 represented a 50% gain from December of 2007, when North Dakota's 135,000 b/d average still had it lagging Wyoming's 145,000, New Mexico's 161,000 and Oklahoma's 164,000.

Here's the Oil Drum laying an egg on Bakken last year:

If total production amounts to only 500 million barrels, as I have suggested, this would equate to about 23 days worth of United States oil usage, spread over many, many years.

Looking at future production another way, the recent peak in production has been 75,000 barrels of oil per day (discussed in more detail below). Even if operators are able to triple this amount, the resulting production of 225,000 barrels a day (which would be a considerable challenge), will amount to only about 1.1% of US oil consumption, assuming the US uses about 20.7 barrels of oil a day, based on EIA data.

If we can reach 225,000 barrels of oil per day, the history of Bakken suggest this level would be short-lived - the peak production will probably last for a year or less - because as we shall see below, total Bakken production can be expected to decline to 50% or less of its peak rate within a few years, because of the steep decline rate of individual wells.

Will the Drum stooges shit all over themselves again like they did with shale gas? Time will tell; but N Dakota is already near the "considerable challenge" of 225,000 bpd, and production is up 50% since Dec. 2007.

- Brewskie

'Ders Still Black Gold in 'Dem Hills?

California's oil glory is long past. It's production peaked back in '85 at 1.1 mbpd (or 1.2 - whatever) and is now spurting out 666,000. However, one maverick cornucopian, Occidental Petroleum Corp., is bucking conventional wisdom and is heading for the hills for what it believes lays buried treasure (link):

Occidental Petroleum Corp., the fourth-biggest U.S. oil producer by market value, is drilling exploratory wells in California in a bet that deposits there hold hundreds of millions of barrels of crude.

Occidental is counting on prospects near Long Beach and in other parts of the state to drive “meaningful” reserves and output growth in the next decade, Chief Executive Officer Ray Irani said. The company will drill 20 exploratory wells this year on sites ignored by rivals that quit searching California in the 1970s in favor of the North Sea and South America.

[...]

“While Texas is a big base for us that over the next 10 years will continue to grow modestly, California is going to grow in a meaningful way,” Irani, the longest-serving CEO of a major U.S. oil company, said yesterday in an interview at Occidental’s headquarters in Los Angeles.

Chief Financial Officer Stephen Chazen said the company is targeting fields with oil and natural-gas reserves equivalent to at least 150 million barrels of crude each. That would be about one-third the size of Chevron’s deepwater Tahiti field in the Gulf of Mexico, which began production in May.

‘Sizeable’ Fields

“We’re very excited about California because it’s a very under-explored area,” Chazen said in the same interview. “You are not going to find Prudhoe Bay, but I think you’ll find sizeable fields here left in California.”

[...]

Occidental has been quietly amassing leaseholds on California land for the past five years with a view to tapping reserves that were overlooked or dismissed by other companies, said Irani, 74. Those leases now encompass 1.1 million acres, an area three times the size of New York City.

- Brewskie

Who Needs Cantarell?

One of the most popular firearms for this peakers' drive by shooting summer is the Canatrell collapse cannon. "Canterll collapsed in 2004 at 2 mbpd. It's down to 700,000 bpd; it's no longer Mexico's largest-producing field (Ku Maloob Zaap is)! I say: who needs it?

In 2007, Mexico was supplying America with 1.3 mbpd, making it effectively America's 3rd largest supplier. However, like much of the developed world, America has shrank the flubby ballast in response to high oil price overdose. As we can see from the graph below...

her appetite has shrunk considerably from the 21+ mbpd day she gorged on back in 2005, to under 19 mbpd currently. A recent estimate holds steady at 18.74 mbpd; the 2Q US oil usage is projected to be 4.2% lower than of last year, making it the lowest in 12 years. Don't slack now kids, let's keep up the good work!

As I've also posted before, despite Canatrell and the N Sea's seemingly sharp drops, non-OPEC crude production hasn't declined that catastrophically since its record in 2004:

She's declined an average of roughly 1 mbpd - that's an annual depletion rate of less than 1%! That's a far cry from the peakers' call of 5%, 6.5% 8% (I've even heard as high as 13%!). It also fits the debunkers' assertion that global peak will result in a slow decline, not a hard crash. It seems King Hubbert thought so, too.

So while Canatrell is giving up the ghost, OECD countries move on without a care...

And let's not forget that non-OPEC total liquids has been kicking ass; that we have our friendly neighbor to the north, Canada, who in good time pick up the slack where Mexico is leaving off (with unpardonable environmental sins, of course). So I say... let Canatrell die, because with 700,000 bpd to date, it can't hurt things much more.

In actuality, there is one country that needs Canatrell badly: Mexico. This impoverished nation receives 40% of its federal budget through oil revenues. With declining oil revenue, Mexico is still loaded with poverty, illiteracy, gangs, drug wars and guns. Somebody might want to tell Dr. Wirth he may want to reconsider his location for a peak oil sustainability.

- Brewskie

Zerrs Gold I Hear Off Zat West Coast

The specifics aren't clear, but Ireland made its first oil discovery off of its west coast in thirty years:

OIL has been found off the west coast for the first time in over 30 years, a discovery which could spark a new rush of exploration drilling.

The discovery was made by a small UK company Serica Energy, which was drilling for gas.The find was made 100km off the west coast, it emerged yesterday.

Shares in the small exploration company Serica Energy soared by 18pc on the London Stock Market after news of the discovery broke.

Serica chief Paul Ellis said that while it was too early to say how much oil had been found, the company now intended to carry out new site surveys to choose a location for a follow-up well next year.

The drilling, which cost the company around $50m (€36m), was paid for under an agreement with Serica's new partner, the German company RWE. In return
for paying the cost of the well the German's secured a 50pc stake in the find,
with Serica holding the balance.

[...]

The discovery is likely to re-awaken interest in oil exploration off the west coast, including in these areas which are not currently under licence.

"This is the first oil discovery west of Ireland for nearly 30 years," Mr Ellis said, adding that its 600 sq km licence area contains several prospects which will now be evaluated as potential drilling targets.

- Brewskie

The "New Gold" Rush in Africa

Europeans rapaciously plundered the continent of Africa for gold and other resources; now the thirst for oil has brought attention to Africa, and its untapped petroleum resources...

West Africa now offers "unparalleled opportunities" for major and independent oil and gas companies, writes Patrick Morris, CEO of Vancouver-based Gold Star Resources Corp. (OTCBulletinBoard: GXXFF) in the June 10th issue of
AFROIL, Africa Oil & Gas Monitor, an online publication of Newsbase Ltd.,
Edinburgh, Scotland read by subscribers in 25 countries (www.newsbase.com; Week 23; page 5 Guest Column). Morris, author of a news column published in AFROIL entitled "West African Oil Rush, Challenges", reported that changing geopolitics, reduced security and political risks, the recent 1.8 billion barrel discovery in West
Africa's largest oilfield, the Jubilee in Ghana, and a new African foreign policy by recently elected U.S. President Barack Obama have all helped in making West Africa a "desirable destination for oil and gas exploration and production."

According to Morris, "For a long time West Africa has been off the radar of the international community because of messy politics and brutal civil wars. Also, apart from Nigeria and Gabon, there had been the disappointing size of oil discoveries made at times of low oil prices. All this is now changing. Expectations by countries and oil & gas companies to discover new reserves in the region are high. Exploration and seismic research activities are underway in all countries of West Africa bar Burkina Faso and Cape Verde. Governments are also actively involved. For example, in Liberia, the National Oil Company of Liberia (NOCAL) is promoting oil and gas exploration and development of its hydrocarbon resources along its continental shelf and slope. The sub-region is also gaining global attention as calm has been restored to countries such as Liberia, Sierra Leone and Cote d' Ivoire, reducing security risks."

Among other things in Africa, it's been recently announced that Uganda's oil reserves may rival Suadi's (even if there's just a quarter of truth here, that's still magnificent), and Brazil, an offshore drilling superstar, has been expressing interest in Angola's sub-salt formations which are reportedly "very similar to Brazil's."

- Brewskie

US Oil Demand Down to 12-Year Low

The EIA sees second-quarter US oil demand down 4.2%:

U.S. oil demand in the second quarter was revised up by a slim 100,000 barrels a day from a month-earlier estimate, but will be a 12-year low for the period, at 18.74 million barrels a day, government forecasters said Tuesday.

Second quarter demand will be down 4.8%, or 940,000 barrels a day,
from a year ago.

Citing the weak economy, the U.S. Energy Information Administration also said full-year 2009 oil demand of 18.86 million barrels a day will be the lowest since 1997, and down 2.9%, or 550,000 barrels a day from a year earlier. That would mark the fourth-straight annual decline in demand in the world's largest oil consumer, and follow a 1.26 million barrels a day, or 6.1%, decline in 2008.

In 2010, the EIA said oil demand will rise a modest 300,000 barrels a day, or 1.6%, to 19.16 million barrels a day.

[...]

The EIA said third-quarter U.S. oil demand is expected to average 18.83 million barrels a day, little changed from 18.84 million barrels a day a year ago. Fourth-quarter demand is expected to average 19.05 million barrels a day, down 1.2%, or 230,000 barrels a day, from a year ago. In May, EIA said fourth-quarter demand would average 19.02 million barrels a day, down 260,000 barrels a day from a year earlier.

BTW - I caught this graph over at Carpe Diem. America's driving decline continues.
>- Brewskie

Non-OPEC Production Offers Optimistic Peak Oil Prelude

Doom-sayers in the peak oil community warn of an impending oil crash once global peak kicks in: it will be like the Titanic, one year after another, with wave after wave of chilling ocean water conquering compartment after compartment. There's no way but down.

Many debunkers beg to differ: many of us argue that declines in oil production will occur at a steady, manageable pace over years that will allow the global community to adjust with ease; and there appears to be evidence to suggest the case.

Non-OPEC crude production has been declining since its record-setting year of '04.

Did you know that? Have you felt it? Do you care?

Right here's the proof. Puts a cratered yawn in your face, doesn't it?

Average crude production has only dropped about a rough million barrels since '04; production is even up a little this year over last. This is with N Sea production dropping at a good clip, and Cantarell falling faster than a meteor. So far, the decline is a far cry from the 5%, 6.5% or even 8% annual decline-rates many doomers have been warning us about. On the other hand, total liquids has been kicking ass and driving up production, nullifying the loss in crude production:

But here's the real gold-plated money shot, the graph that really counts. Remember, folks... China is considered apart of the OECD.

So there you have it. Non-OPEC crude has been in decline since 2004, and the developed world has been sleepwalking through it all without a care. Best of all, OECD demand has fallen roughly 5 mbpd since '05.

Of course I'd like to America's own peak as an example. The typical doom chant in any peak oil convention is the numb-minding reminder that America's oil production peaked in 1970 at 9.5 mbpd. Yup, it certainly did, and today we produce about 8 mbpd - making us the the 3rd largest producer in the world, double of OPEC's second largest producer, Iran. If Japan had our production, it would easily fill all of its consumption needs, plus have enough leftover to be a Top Five exporter. Is Alaska helping us? Alaska crapped out long ago! Production isn't America's problem, it's consumption.

For more info. on the argument for a slow decline, check out this excellent post by JD of Peak Oil Debunked. Pay attention to N America's own oil production statistics - it's been in a plateau of about 14-15 mbpd for the past 30 years. Has this impacted your life? Are you still able to drive your car? Are the freeways devoid of commuters? Has this impacted your ability to buy cheap plastic crap from the shelves of Target? Maybe you should stay in your doom bunker until it's safe!

- Brewskie

Tillerson, Yergin See Oil Price Decline

I found this interesting bit off of MSNBC.com. One fool from Motley Fool also foresees an oil price decline (and see who else does, too):

Oil's flimsy fundamentals

No longer being deeply oversold by investors, I have to assume that the oil services group is now largely trading up on the improving price of crude, which has risen more than 60% from its February nadir of around $42 per barrel. (I'm ignoring the exaggerated effect of the January futures contract expiration.) This is exactly why I'm nervous about these stocks today.

And what do Rex Tillerson and Daniel Yergin say?

Rex Tillerson, chief executive of ExxonMobil (NYSE: XOM), said fundamentals didn't justify $70 oil in September 2007. After the demand destruction that's followed, he obviously doesn't think much of this latest rally in crude, calling it "just a bet" on the part of traders.

Daniel Yergin, author of The Prize and chairman of IHS Cambridge Energy Research Associates (CERA), is in pretty much the same boat, pointing to a 3 million-barrel-per-day drop in demand to pre-2005 levels. He attributes oil's performance more to the stock market rally and the falling dollar.

If Yergin is correct on this point, and I believe he is, then there are two reasons to be concerned.

- Brewskie

New Oil Could Keep Alaska Production Alive for Years

I remain to the present rather hesitant about drilling in ANWR. Yes, I actually do care about the enviorment. However, I'm also empathetic to Alaska's plight: 90% of the state's revenue comes from oil taxes, and with its high unemployment and declining oil production, I also understand why Alaskans are as some would describe, America's least environmentally consciousness folks.

Now we may be able to tap the best of both world's minus ANWR. There's been a blaze in the media about untapped oil riches in the Arctic: unlocked oil in the Alaska Platform may hold 27.9 bb of oil, 31% of undiscovered Arctic oil. That's nearly 15 billion barrels than Pruhdoe Bay original hold(13 billion). Much of this oil is under less than 500 meters of water (Tupi is under more than 2,000 meters of water - and that's not including the rock and pre-salt layers!

Click here for the article or read below:

The U.S. Geological Survey says about 30% of the world's undiscovered gas and 13% of the world's undiscovered oil may be found in an area north of the Arctic Circle, mainly offshore under less than 500 meters of water.

In a report published Friday in this month's Science Magazine, USGS scientists said, "For better or worse, limited exploration opportunities elsewhere in the world combined with technological advances make the Arctic increasingly attractive for development."

The USGS noted that the Arctic continental shelves "constitute one of the world's largest remaining prospective areas. Until now, remoteness and technical difficulty, coupled with abundant low-cost petroleum, have ensured that little exploration occurred offshore."

The Alaska Platform stands out, the USGS article said, "with more than 31% of mean undiscovered Arctic oil (27.9 BBO [billion barrels of oil]. ...The Alaska Platform is already a well-known petroleum producing area; new discoveries there could maintain the flow of Alaska oil for many years to come."

- Brewskie

EIA Predicts "Fairly Loose" Oil Market for Next 2 Years

This from the EIA's crystal ball...

The U.S. on Tuesday forecast that crude oil markets will stay "fairly loose" over the next two years, noting that OPEC will have difficulty implementing pledged crude output cuts.

"The second Organization of Petroleum Exporting Countries agreement for substantial production cuts has failed, thus far, to support substantially higher prices," the Energy Information Administration, a wing of the U.S. Energy Department, said in a monthly forecast. "The outlook for supply and demand fundamentals indicates a fairly loose oil market balance over the next two years."

The Short-Term Energy Outlook issued Tuesday by the EIA is the first to
include monthly forecasts through December 2010.

In announcing two output cuts, OPEC has tried to shore up oil prices by agreeing to curtail output by a total of 4.2 million barrels a day from its September 2008 production level of 31.4 million barrels a day, but oil futures prices have continued their plunge, although they have stabilized somewhat since the beginning of the year. Oil futures, which recently traded around $38 a barrel, are down more than 70% from all-time highs.

- Brewskie